Gearing Ratio measures the proportion of a company’s debt relative to its equity, indicating the level of financial leverage.
The Gearing Ratio shows how much of a company’s operations are financed by borrowed funds (debt) compared to shareholders’ funds (equity).
It helps investors and lenders understand the financial risk of a company. Higher gearing means higher dependence on debt, which increases both risk and potential returns.
👉 Gearing Ratio = Total Debt ÷ Shareholders’ Equity
(Note: Variations may include long-term debt or total capital)
"If a company has ₹80 crore debt and ₹100 crore equity: 👉 Gearing Ratio = 0.8"